Navigating the taxation of property sale in Romania can be a complex endeavor, especially for those unfamiliar with the local legal and fiscal landscape. Understanding how this process works in practice is essential for both buyers and sellers of real estate. This helps them ensure tax compliance and optimize financial outcomes.
The prices of apartments and houses in Romania continue to be on an upward trend in 2024, with expectations that the trend may continue throughout the year, at least for new ones.
So, if you have been planning to sell a property you own in Romania, this may be the right time.
If you have already found a buyer and are now checking on the potential taxation on property sale, this is the right place. The first good news for you is that, depending on the ownership period, you may qualify for the lower tax rate, which may mean lower taxation on your property sale in Romania. We further explain how this can apply.
So, to ensure you cash in the amount of money you planned for, do your calculations carefully, because the sale of a property in Romania entails potential tax costs, on which we detail below.
The sale of a property located on Romanian territory is subject to taxation as per the Romanian tax law. The income tax due by an individual at sale of the property applies on the entire sale value.
The income tax rate that applies on sale of real estate in Romania is different, depending on the period of ownership. Thus, the applicable income tax rates are as follows:
More exactly, if you sell your property after you have owned it for less than 3 years, you must pay a 3% income tax. Otherwise, for a sale of property which you have owned for more than 3 years, a much lower income tax of only 1% applies. The income tax (either the 3% or the 1%) applies to the sale price of the property as stipulated in the sale-purchase agreement signed with the buyer.
Also, if the property you sell is owned together with other persons, for example your spouse, the income tax is due by each, and applies proportionally, on the part of the sale price corresponding to each person’s ownership percentage. For example, if the property is owned by four persons in equal percentages, the taxable income determined as explained above must be allocated to each owner in a percentage of 25%, and each of them must pay income tax of 3% or 1% on the taxable income derived, depending on the property ownership period.
If you sell the real estate to a family member (up to 3rd grade relative), the obligation to pay the income tax still applies. The only case when the sale is not subject to taxation is when the property is donated to a relative of up to the 3rd grade, or when it is inherited.
The sale price that must be taken into account for calculating the income tax due is the one declared in the sale-purchase contract. Nevertheless, if the value declared in the sale-purchase contract is lower than the standard evaluation price as per the Romanian public notaries’ evaluation grid, the value that will be considered for taxation purposes will be the latter.
You have to know that, if in the sale-purchase contract you declare a different amount then the actual sale value, you risk criminal consequences for tax evasion, but also civil ones, which can also end with the annulment of the sale-purchase agreement.
The good part about the income tax payment for the sale of real estate is that the tax is paid at the notary office, upon the authentication of the sale-purchase agreement. It is the obligation of the notary public to perceive and collect the income tax due from you, and further transfer it to the Romanian tax authorities’ account. The payment deadline that the notary must observe is the 25th of the following month in which the tax is collected.
As an important procedural aspect, foreign citizens who do not have Romanian citizenship, and sell a property in Romania, will be able to finalize a property sale transaction and get the income tax paid on their behalf only after obtaining a Romanian tax identification number from the local tax office (ANAF).
As a seller of real estate in Romania, you should have no other tax or financial costs. The buyer is the one who should incur any other transaction related costs, but it is also useful for you to know them, if for example they are brought into the price negotiation discussion.
For the authentication of the sale-purchase agreement by the notary, there are certain types of fees that will apply. The buyer is the one who pays the notary fee for the authentication, the tabulation fee, as well as the mortgage contract authentication fee, if applicable.
The value of these fees depends on the sale price and the method the buyer uses to pay for the property: no mortgage, with mortgage, through the “New Home” or “First Home” state sponsored programs, etc. Also, you must take into account that the notary fees may vary depending on the fees grid applied by each local public notary.
Founded in 2008 as TAX IQ, our company has gained extensive expertise over the years, allowing us to effectively utilize our experience to benefit our clients’ best interests. Over time, we have succeeded to build a solid reputation as trusted tax advisor for the entire community of Romanian expats.
Founded in 2008 as TAX IQ, our company has gained extensive expertise over the years, allowing us to effectively utilize our experience to benefit our clients’ best interests. Over time, we have succeeded to build a solid reputation as trusted tax advisor for the entire community of Romanian expats.